Four issues which must be cleared if the UEM-Renong deal is to pass the test of accountability and transparency

Media Statement
by Lim Kit Siang

(Petaling Jaya, Wednesday): Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim said yesterday that his explanation on the Registrar of Companies' imposition of a fine and KLSE' reprimand of UEM in Parliament was the first ever by a Finance Minister pertaining to a private company. He described the case as "an important milestone decision in the development of corporate exercise and restructuring" in the country, declaring that "the principles of transparency and accountability must be observed at all times".

However, the UEM-Renong deal cannot pass the test of accountability and transparency unless the many swirling questions in public minds are answered, four of which are as follows:

Firstly, Renong executive chairman Halim Saad had said that the UEM purchase of 723 million Renong shares was made in a series of transactions on the open market.

However, in the past month, the trading volume of Renong shares on the open market amounts to some 112 million shares, which represents only about 15 per cent of UEM's deal even if every share was bought up by UEM. This would mean that some 611 million Renong shares (or 85 per cent ) were bought through off market trading.

Secondly, UEM announced that it had acquired 723 million Renong shares, representing a 32.6 per cent stake, from the open market for RM2.4 billion or an average of RM3.24 per Renong share. However, in the month before November 17, when the deal was announced, the price of Renong never reached RM3.24 per share - the highest being RM3.22 per share on 15th October and the lowest being RM3 per share on 14th November and RM2.90 on November 17.

Thirdly, who are the seller or sellers for which UEM paid a premium price of RM3.24 a share, when Renong was last traded for RM2.90 before the announcement of the UEM-Renong deal, and was traded last Friday at RM1.80 per share before suspension of the counter yesterday.

Fourthly, what are the bank or banks which lent UEM the RM2.4 billion to pay for the 723 million Renong shares.

Can the UEM management give full and satisfactory answers on these four issues to establish the accountability and transparency of the UEM-Renong deal, which had been the single corporate decision which had precipitated the biggest crash in the Kuala Lumpur stock market in the four-month economic crisis, causing the KLSE Composite Index to fall by 19.58 per cent, from 667.29 to 536.62 points in three days, wiping out RM70 billion of the investors' funds in the stock exchange.

When the market reacted in outrage as well as panic to the UEM-Renong deal, which was seen as a UEM bail-out of Renong to the detriment of the UEM minority shareholders, it was Halim Saad who, as Renong executive chairman, gave a press conference where he emotionally refuted speculation that it was a bail-out attempt, and asked: "Isn't that a good deal for UEM? Why do you say it is a bail-out for Halim Saad and Renong?"

The UEM-Renong deal is an unmitigated catastrophe, to the UEM minority shareholders, UEM itself as well as to all investors in the KLSE. With the revocation of waiver, UEM now has to find another RM1.6 billion to make a general offer to the 23.1 per cent of Renong shares it does not own at the price of at least RM3.24 per share, when Renong share price has plummetted to RM1.80 per share.

It should be UEM which should have called a press conference to justify the purchase of 723 million Renong shares at premium price, rather than the Renong executive chairman calling a press conference to refute speculation that he or Renong was being rescued.

It probably makes no difference as Halim Saad, apart from being executive chairman of Renong is also executive vice-chairman of UEM. This, however, raises more question about the propriety of the incestuous nature of the UEM-Renong deal.

Anwar's announcement about the imposition of a fine by the Registrar of Companies and KLSE' reprimand of UEM for not making timely public disclosures about the circumstances leading up to its purchase of shares in parent company, Renong Bhd. has not been very assuring.

This is because the maximum fine for breach of Section 69(E) under the Companies Act 1965 on notification of change of substantial shareholder interests is only RM5,000, which is so meagre as to be completely meaningless when compared to the national catastrophe to the stock market wrought by the UEM-Renong deal.

The investing public question why the KLSE gave only a reprimand, which is the most lenient action for breach of Listing Rules, when there are other heavier penalties, such as suspension or any other penalties and/or conditions the KLSE thinks fit.

UEM minority shareholders are fully justified in their outrage that they are the victims of an incestous UEM-Renong manoeuvre which is completely one-sided as benefitting Renong and Renong majority shareholders at the expense of UEM and UEM shareholders.

UEM minority shareholders are also questioning the legality of the UEM-Renong deal, as Section 132C of the Companies Act requiring the approval of the company's general meeting for any acquisition which would "materially and adversely affect the performance or financial position of the company" had not been sought.

Furthermore, UEM minority shareholders also question whether the UEM Board of Directors had taken extraneous and improper considerations into account in entering into the UEM-Renong deal, which would make it challengeable in a court of law.


*Lim Kit Siang - Malaysian Parliamentary Opposition Leader, Democratic Action Party Secretary-General & Member of Parliament for Tanjong